China's Central Banks Set for Significant Rate Cuts

Chinese banks are preparing to reduce rates on 300 trillion yuan of deposits, following guidance from the central bank. This move aims to alleviate profitability pressures amid economic challenges. The cut would mark the second rate reduction this year, targeting long-term financial stability.

In a significant move aimed at bolstering financial stability, Chinese banks are poised to slash rates on a colossal 300 trillion yuan ($42.20 trillion) of deposits, according to sources cited by Bloomberg News on Tuesday. The central bank's interest rate self-disciplinary mechanism will guide major banks like the Industrial & Commercial Bank of China and China Construction Bank Corp to lower deposit rates.

Reports suggest that one-year time deposit rates may decrease by at least 20 basis points, while longer-term rates could see a reduction of at least 25 basis points. This anticipated action follows previous comments by the People's Bank of China Governor, Pan Gongsheng, indicating further rate cuts as part of the bank's ongoing efforts to stimulate the economy.

The upcoming rate adjustment seeks to alleviate the profitability pressures on banks, which have been confronting weak loan demand and an uptick in bad debts due to the broader economic downturn and challenges in the property sector. This move represents the second across-the-board reduction this year, reinforcing China's commitment to economic recovery.

(With inputs from agencies.)